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Written by John Egan for Industrial Info Resources (Sugar Land, Texas)--President Donald Trump has vowed repeatedly to revive the U.S. coal-mining industry. Despite steps he has taken to relax environmental regulations relating to coal, few U.S. utilities say they plan to significantly alter their fuel resource decisions and burn more coal. However, coal shipments are up compared with 2016, which may hint at how and where a U.S. coal-industry revival could take place: in overseas markets.
Major railroads reporting second-quarter earnings say they are transporting more coal than they were in the comparable year-earlier period. Major railroads, like Union Pacific Corporation (UP) (NYSE:UNP) (Omaha, Nebraska) and CSX Corporation (NASDAQ: CSX) (Jacksonville, Florida) report higher volumes of coal for export in the just-concluded quarter compared with the second quarter of 2016.
CSX reported its coal-for-export shipments rose 30% in the second quarter compared with the year-earlier period. "Export coal demand remains strong, and we now expect to ship around 30 million tons for the year," said CSX Chief Financial Officer Frank Lonegro during the company's earnings conference call. CSX shipped 16.9 million tons of export coal for the six months ended June 30.
UP said coal shipments from the Powder River Basin and other areas were both up appreciably in the second quarter. "On a tonnage basis, Powder River Basin and other regions were both up 17% from higher natural gas prices and stronger West Coast exports, which benefitted from favorable global economics for western U.S. coal," said Beth Whited, chief marketing officer for Union Pacific. For more information, see July 21, 2017, article - Coal Shipments Give Boost to CSX, Union Pacific Income. Stronger coal shipments boosted overall coal-related quarterly revenue 25%, the company said.
The Association of American Railroads (AAR) (Washington, D.C.) has also noted increasing rail shipments of coal, which have grown year-over-year for each of the past six months. In June, coal shipments were up 40,333 carloads, or 13.2%, from June 2016. The industry's monthly gains in coal shipments for the first half of this year compared with the year-earlier period ranged from about 12% to about 27%. For more information, see July 11, 2017, article - Boost in U.S. Rail Shipments Reflects Bump in Coal Volumes.
Increasingly, U.S. coal is headed overseas. The U.S. Energy Information Administration's (EIA) quarterly coal report, released earlier this month, said first-quarter coal exports rose 58% from the year-earlier first quarter. Steam coal exports increased 6 million short tons, and metallurgical coal exports increased 2 million short tons. Most of these exports went through ports on the Atlantic coast and the Gulf of Mexico.
Click on the image at right to see quarterly export shipments of U.S. coal.
However, first-quarter 2017 exports of steam and metallurgical coal, while higher than in the first quarter of 2016, were about what they were in the first quarter of 2015, and lower than exports during the first quarters of 2014, 2013, 2012 and 2011, the EIA noted.
The EIA's most recent Short-Term Energy Outlook (STEO), released July 11, projected growth in coal exports would slow in the coming months. Overall, the July report forecasts full-year exports of coal would grow 19%, or 11 million short tons, to about 72 million short tons in 2017.
A lot of the exported coal is headed for China and India, although China's attractiveness as a market might not continue for long. Supply restrictions in China and flooding in Australia that closed mines there forced China's coal users to search for other sources of supply on a short-term basis. U.S. producers and shippers were happy to oblige.
But the annual energy outlook from BP plc (NYSE:BP) (London, England) noted that China is reducing the carbon intensity of its fuels, which it expects will cut into future coal use. China's stunning economic growth of 1995-2015 was largely powered by coal, BP noted, but as Chinese economic growth slows, and that economy becomes more energy efficient, it is expected to have a lower overall demand for energy. Coal is the fuel that is projected to bear the brunt of that fall in demand for all forms of energy. For more on that, see June 10, 2017, article - Glum and Glummer: BP Sees Bleak Global Outlook for Coal Through 2035.
Click on the images at right to see BP's projection of Chinese energy demand.
As well, another recent report on coal cast doubt on how long export markets can grow, particularly as China moves toward a lower-carbon energy mix. "While global coal markets have recovered slightly over the past few months due to supply restrictions in China and flooding in Australia, we expect this rally to be short-lived," predicted a recent report from Columbia University's Center on Global Energy Policy. That report - Can Coal Make a Comeback? - added: "Slower economic growth and structural adjustment in China will continue to put downward pressure on global coal prices and limit the market opportunities for U.S. exports."
That report predicted coal demand from India likely will grow in the coming years, but not enough to make up for the slowdown in China. "The same is true for other emerging economies, many of whom are negatively impacted by decelerating Chinese commodities demand themselves," the report said. For more on the outlook for coal exports and U.S. coal producers, see July 19, 2017, article - What Felled Coal and What Does its Future Look Like?
U.S. utilities have said that Trump's dismantling of his predecessor's environmental and energy rules will not cause them to increase their use of coal, though they acknowledged price-driven fuel switching vis-à-vis natural gas could cause temporary bump up demand for coal. For more on that, see April 20, 2017, article - Trump, Utilities Disagree Over the Future of Coal-Fired Generation. But a recent move by the Trump administration to stoke coal-fired power plant development overseas, if approved, could boost the fortunes of King Coal.
According to an article in Bloomberg, the U.S. will seek to use a United Nations fund designed to aid nations hard hit by climate change to promote the construction of coal-fired power plants around the world. The U.S. already donated $1 billion to the so-called Green Climate Fund (Incheon, Republic of Korea), and it can now use its seat on that board to advance American-energy interests globally, according to a White House official quoted by Bloomberg.
It looks like a long shot. Formed in 2011 to make "an ambitious contribution to the global efforts towards attaining the goals set by the international community to combat climate change," the U.N. Green Climate Fund funds efforts in developing countries to respond to global climate change, according to the group's website. The fund, which has disbursed about $2.2 billion in funding for 43 projects in 64 countries since its founding, "helps developing countries limit or reduce their greenhouse gas (GHG) emissions and adapt to climate change. It seeks to promote a paradigm shift to low-emission and climate-resilient development, taking into account the needs of nations that are particularly vulnerable to climate change impact," its website added.
During Barrack Obama's presidency, the U.S. pledged $3 billion to that U.N. fund, though only $1 billion has been paid to date, the Bloomberg article noted. While Trump has said that the U.S. will not fulfill its remaining $2 billion commitment, the U.S. does have a seat on the fund's managing board for another year or so, and that it intends to use that seat to advocate for construction of more coal-fired power plants.
Citing an anonymous White House official, the Bloomberg article said that the U.S. wants to "encourage developing countries to build high-efficiency (power) plants that produce fewer greenhouse gas emissions than earlier facilities and construct 'clean coal' plants that employ carbon-capture technology to strip out even more." The high cost of building coal-fired power plants, and the expense and technical complexity of carbon capture and sequestration (CCS), suggest it will be an uphill climb for the Trump administration to convince other members of the GCF to fund construction of coal-fired power plants, even those equipped with CCS technology. As well, the relatively small size of the U.N. Global Climate Fund and its apparent commitment to spread funding over numerous projects, suggests it would not be particularly receptive to funding construction of a coal-fired power plant in a developing country.
The Trump administration also plans to push the World Bank and other multilateral development banks to change their policies and finance the construction of coal-fired plants in developing nations, the Bloomberg article added. Those moves likely will be opposed by environmental organizations and nations that signed the Paris Climate Accord, from which the U.S. withdrew earlier this year.
U.S. coal companies will take a break wherever they find it. The last few years have been bleak ones for the industry, as companies closed mines, let workers go, sold assets, declared bankruptcies and saw stock prices fall 90% or more. Although a few small mines have recently opened, the industry today is a shadow of its former self. Overall consumption of steam coal by U.S. Power companies fell about 61 million short tons last year, to about 677 million short tons, its lowest level in three decades. But the EIA sees a slight pickup in steam coal demand from U.S. power companies this year, to about 687 million short tons. For a summary of the news, see August 12, 2016, article - Coal Crisis Threatens to Consume Murray Energy. But for some good news, see June 5, 2017, article - Not Fake News: New Coal Mines Opening in U.S., Just Not Very Big Ones.
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, five offices in North America and 10 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities. Follow IIR on: Facebook-Twitter-LinkedIn. For more information on our coverage, send inquiries to info@industrialinfo.com or visit us online at http://www.industrialinfo.com/.
Major railroads reporting second-quarter earnings say they are transporting more coal than they were in the comparable year-earlier period. Major railroads, like Union Pacific Corporation (UP) (NYSE:UNP) (Omaha, Nebraska) and CSX Corporation (NASDAQ: CSX) (Jacksonville, Florida) report higher volumes of coal for export in the just-concluded quarter compared with the second quarter of 2016.
CSX reported its coal-for-export shipments rose 30% in the second quarter compared with the year-earlier period. "Export coal demand remains strong, and we now expect to ship around 30 million tons for the year," said CSX Chief Financial Officer Frank Lonegro during the company's earnings conference call. CSX shipped 16.9 million tons of export coal for the six months ended June 30.
UP said coal shipments from the Powder River Basin and other areas were both up appreciably in the second quarter. "On a tonnage basis, Powder River Basin and other regions were both up 17% from higher natural gas prices and stronger West Coast exports, which benefitted from favorable global economics for western U.S. coal," said Beth Whited, chief marketing officer for Union Pacific. For more information, see July 21, 2017, article - Coal Shipments Give Boost to CSX, Union Pacific Income. Stronger coal shipments boosted overall coal-related quarterly revenue 25%, the company said.
The Association of American Railroads (AAR) (Washington, D.C.) has also noted increasing rail shipments of coal, which have grown year-over-year for each of the past six months. In June, coal shipments were up 40,333 carloads, or 13.2%, from June 2016. The industry's monthly gains in coal shipments for the first half of this year compared with the year-earlier period ranged from about 12% to about 27%. For more information, see July 11, 2017, article - Boost in U.S. Rail Shipments Reflects Bump in Coal Volumes.
Increasingly, U.S. coal is headed overseas. The U.S. Energy Information Administration's (EIA) quarterly coal report, released earlier this month, said first-quarter coal exports rose 58% from the year-earlier first quarter. Steam coal exports increased 6 million short tons, and metallurgical coal exports increased 2 million short tons. Most of these exports went through ports on the Atlantic coast and the Gulf of Mexico.
However, first-quarter 2017 exports of steam and metallurgical coal, while higher than in the first quarter of 2016, were about what they were in the first quarter of 2015, and lower than exports during the first quarters of 2014, 2013, 2012 and 2011, the EIA noted.
The EIA's most recent Short-Term Energy Outlook (STEO), released July 11, projected growth in coal exports would slow in the coming months. Overall, the July report forecasts full-year exports of coal would grow 19%, or 11 million short tons, to about 72 million short tons in 2017.
A lot of the exported coal is headed for China and India, although China's attractiveness as a market might not continue for long. Supply restrictions in China and flooding in Australia that closed mines there forced China's coal users to search for other sources of supply on a short-term basis. U.S. producers and shippers were happy to oblige.
But the annual energy outlook from BP plc (NYSE:BP) (London, England) noted that China is reducing the carbon intensity of its fuels, which it expects will cut into future coal use. China's stunning economic growth of 1995-2015 was largely powered by coal, BP noted, but as Chinese economic growth slows, and that economy becomes more energy efficient, it is expected to have a lower overall demand for energy. Coal is the fuel that is projected to bear the brunt of that fall in demand for all forms of energy. For more on that, see June 10, 2017, article - Glum and Glummer: BP Sees Bleak Global Outlook for Coal Through 2035.
As well, another recent report on coal cast doubt on how long export markets can grow, particularly as China moves toward a lower-carbon energy mix. "While global coal markets have recovered slightly over the past few months due to supply restrictions in China and flooding in Australia, we expect this rally to be short-lived," predicted a recent report from Columbia University's Center on Global Energy Policy. That report - Can Coal Make a Comeback? - added: "Slower economic growth and structural adjustment in China will continue to put downward pressure on global coal prices and limit the market opportunities for U.S. exports."
That report predicted coal demand from India likely will grow in the coming years, but not enough to make up for the slowdown in China. "The same is true for other emerging economies, many of whom are negatively impacted by decelerating Chinese commodities demand themselves," the report said. For more on the outlook for coal exports and U.S. coal producers, see July 19, 2017, article - What Felled Coal and What Does its Future Look Like?
U.S. utilities have said that Trump's dismantling of his predecessor's environmental and energy rules will not cause them to increase their use of coal, though they acknowledged price-driven fuel switching vis-à-vis natural gas could cause temporary bump up demand for coal. For more on that, see April 20, 2017, article - Trump, Utilities Disagree Over the Future of Coal-Fired Generation. But a recent move by the Trump administration to stoke coal-fired power plant development overseas, if approved, could boost the fortunes of King Coal.
According to an article in Bloomberg, the U.S. will seek to use a United Nations fund designed to aid nations hard hit by climate change to promote the construction of coal-fired power plants around the world. The U.S. already donated $1 billion to the so-called Green Climate Fund (Incheon, Republic of Korea), and it can now use its seat on that board to advance American-energy interests globally, according to a White House official quoted by Bloomberg.
It looks like a long shot. Formed in 2011 to make "an ambitious contribution to the global efforts towards attaining the goals set by the international community to combat climate change," the U.N. Green Climate Fund funds efforts in developing countries to respond to global climate change, according to the group's website. The fund, which has disbursed about $2.2 billion in funding for 43 projects in 64 countries since its founding, "helps developing countries limit or reduce their greenhouse gas (GHG) emissions and adapt to climate change. It seeks to promote a paradigm shift to low-emission and climate-resilient development, taking into account the needs of nations that are particularly vulnerable to climate change impact," its website added.
During Barrack Obama's presidency, the U.S. pledged $3 billion to that U.N. fund, though only $1 billion has been paid to date, the Bloomberg article noted. While Trump has said that the U.S. will not fulfill its remaining $2 billion commitment, the U.S. does have a seat on the fund's managing board for another year or so, and that it intends to use that seat to advocate for construction of more coal-fired power plants.
Citing an anonymous White House official, the Bloomberg article said that the U.S. wants to "encourage developing countries to build high-efficiency (power) plants that produce fewer greenhouse gas emissions than earlier facilities and construct 'clean coal' plants that employ carbon-capture technology to strip out even more." The high cost of building coal-fired power plants, and the expense and technical complexity of carbon capture and sequestration (CCS), suggest it will be an uphill climb for the Trump administration to convince other members of the GCF to fund construction of coal-fired power plants, even those equipped with CCS technology. As well, the relatively small size of the U.N. Global Climate Fund and its apparent commitment to spread funding over numerous projects, suggests it would not be particularly receptive to funding construction of a coal-fired power plant in a developing country.
The Trump administration also plans to push the World Bank and other multilateral development banks to change their policies and finance the construction of coal-fired plants in developing nations, the Bloomberg article added. Those moves likely will be opposed by environmental organizations and nations that signed the Paris Climate Accord, from which the U.S. withdrew earlier this year.
U.S. coal companies will take a break wherever they find it. The last few years have been bleak ones for the industry, as companies closed mines, let workers go, sold assets, declared bankruptcies and saw stock prices fall 90% or more. Although a few small mines have recently opened, the industry today is a shadow of its former self. Overall consumption of steam coal by U.S. Power companies fell about 61 million short tons last year, to about 677 million short tons, its lowest level in three decades. But the EIA sees a slight pickup in steam coal demand from U.S. power companies this year, to about 687 million short tons. For a summary of the news, see August 12, 2016, article - Coal Crisis Threatens to Consume Murray Energy. But for some good news, see June 5, 2017, article - Not Fake News: New Coal Mines Opening in U.S., Just Not Very Big Ones.
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, five offices in North America and 10 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities. Follow IIR on: Facebook-Twitter-LinkedIn. For more information on our coverage, send inquiries to info@industrialinfo.com or visit us online at http://www.industrialinfo.com/.
